The RBA and the Big Four

Posted on February 10, 2012

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The ANZ have increased their rates. While 0.06% may seem a very small amount, across its  retail mortgages and small business lending, it will no doubt account to many, many millions of dollars. The shocking thing is that this increase comes after the RBA held off on increasing the cash rate.

If we see the trend of banks moving their rates independently to the Reserve Bank, I can’t help but feel it will bring in an era of uncertainty. Knowing that the RBA has some influence over the big four gave many of us assurance that they could keep them honest. Now though, it seems anything can happen. Pandora’s box has been opened.

Bill Evans, chief economist at Westpac has pointed out a few facts and goes on to say, “”When you assess the various pieces of the [RBA] Bank’s description of the domestic economy – weak employment; rising unemployment rate; subdued retail spending; soft housing market; below trend growth outside mining; scaling back of public investment; building construction subdued; inflation to remain around the mid-point of the target range; policy at neutral, not stimulatory – we see a fairly clear case for policy to move into the stimulatory zone immediately.”

This comes after the RBA has stated that their policies will remain unchanged unless there is a significant deterioration of financial positions overseas. It makes sense to stimulate our economy in the event of a meltdown overseas, rather than a soft domestic economy. This may sound absurd but we need to deduce which is the greater of two evils.

With that aside, the decision of the ANZ to increase their rates will be an interesting test for the Australian Bankers Association where they said:

“The Australian Bankers Association acknowledges this may result in more than 30 per cent of homeowners moving banks in search of a better deal.”  and Prime Minister Julia Gillard telling unhappy customers to “walk down the road”.

Steve Munchenberg of the Australian Bankers Association said, “Last year about one in three people switched, and that was the top end of the historical range. And this year could be even higher.”

I guess we’ll find out.

Sources:
Herald Sun
Property Observer
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Posted in: discussion, rates